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Secretary to Government of Orissa, Irrigation Dept. and ors. Vs. Raghunath Mohapatra - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtOrissa High Court
Decided On
Case NumberMisc. Appeal No. 553 of 1982
Judge
Reported inAIR1985Ori182
ActsArbitration Act, 1940 - Sections 8, 8(2), 13, 20, 29, 30, 33 and 37; Limitation Act, 1963 - Schedule - Article 137
AppellantSecretary to Government of Orissa, Irrigation Dept. and ors.
RespondentRaghunath Mohapatra
Appellant AdvocateAddl. Govt. Adv.
Respondent AdvocateY. Das, Adv.
DispositionAppeal dismissed
Cases ReferredNew Delhi v. Union of India
Excerpt:
.....8(2) of the act. union of india) the supreme court held (para 9) :the rule thus is that as the parties choose their own arbitrator to be the judge in the dispute between them, they cannot, when the award is good on the face of it, object to the decision either upon the law or the facts. ..thus law is well settled that the arbitrator is the sole judge of the facts and law involved in the case before him and his decision when not supported by reasons is not open for review by the court unless an objection to the legality of the award is apparent on the face of it. 8 of 1980 was filed by him on 15-4-80, clearly beyond the period of limitation of three years. 3 on 23-11-77 and accordingly it has been urged on his behalf that his application dated 15-4-80 under section 8(2) of the act was..........parties. the respondent filed a statement of claims and the appellants filed counter before the learned arbitrator who heard the parties and finally on 15-5-82 made an award of rs. 19,57.775/- (rupees nineteen lakhs fiftyseven thousand seven hundred and seventyfive only) in favour of the respondent. the learned arbitrator further directed that the respondent -was entitled to receive interest on the awarded amount from 1-11-72 till the date of final payment or decree whichever was earlier. the award was received by the court on 22-6-82 and registered as o.s. no. 18 of 1982 (arbitration). the appellants filed objection against the award under sections 30 and 33 of the act and it was registered as misc. case no. 32 of 1982. by his judgment dt. 4-10-82, the learned subordinate judge.....
Judgment:

B.N. Misra, J.

1. This appeal under Section 39(1)(vi) of the Arbitration Act, 1940 (hereinafter referred to as 'the Act') is directed against the judgment dt. 4-10-82 of the learned Subordinate Judge, Nayagarh in O.S. No. 18 of 1982 (Arbitration).

2. The respondent is a contractor. Appellant No. 3 had entrusted him with the execution of 'Construction of Panipoila MIP' under agreement No. 187-F-2 of 1971-72. Disputes arose between the parties and as appellant No. 2 failed to appoint an arbitrator as per Clause 23 of the agreement, the respondent moved the court for appointment of an arbitrator under Section 8(2) of the Act. The application was registered as Misc. Case No. 8 of 1980 and after hearing the parties the learned Subordinate Judge by order dt. 18-11-80 read with order dt. 15-12-80 appointed Shri PrafullaChandra De, Retired District & Sessions Judge, as the Arbitrator to decide the disputes between the parties. The respondent filed a statement of claims and the appellants filed counter before the learned Arbitrator who heard the parties and finally on 15-5-82 made an award of Rs. 19,57.775/- (Rupees Nineteen Lakhs Fiftyseven Thousand Seven Hundred and Seventyfive only) in favour of the respondent. The learned Arbitrator further directed that the respondent -was entitled to receive interest on the awarded amount from 1-11-72 till the date of final payment or decree whichever was earlier. The award was received by the court on 22-6-82 and registered as O.S. No. 18 of 1982 (Arbitration). The appellants filed objection against the award under Sections 30 and 33 of the Act and it was registered as Misc. Case No. 32 of 1982. By his judgment dt. 4-10-82, the learned Subordinate Judge overruled the objection of the appellants, upheld the award and granted interest to the respondent at the rate of 6% per annum from the date of the decree till final payment.

3. On going through the award, I find that the learned Arbitrator has given a lump sum award and has not given any reasons for his decision. In AIR 1967 SC 1030 (Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore) it was held (at Pp. 1031-32) :

'.....The arbitrator could give a lump sum award. He was not bound to give a separate award for each claim. His award on both fact and law is final. There is no appeal from his verdict. The Court cannot review his award and correct any mistake in his adjudication, unless an objection to the legality of the award is apparent on the face of it. In Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd., 50 Ind App 324 : AIR 1923 PC 66, the Privy Council stated :

'An error in law on the face of the award means, in their Lordships view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous.' In the present case, the arbitrator gave no reason for the award. We do not find in the award any legal proposition which is the basis of the award, for less a legal proposition which is erroneous. It is not possible to say from theaward that the arbitrator was under a misconception of law. The contention that there are errors of law on the face of the award is rejected.'

In AIR 1971 SC 696 (Alien Berry and Co. Pvt. Ltd. v. Union of India) the Supreme Court held (Para 9) :

'.....The rule thus is that as the parties choose their own arbitrator to be the Judge in the dispute between them, they cannot, when the award is good on the face of it, object to the decision either upon the law or the facts. Therefore, even when an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake.'

In (1979) 47 Cut LT 472 : (AIR 1980 Orissa 74) (Executive Engineer, Rural Engineering Organisation, Khurda v. D.N. Senapati) it was held (Para 2 of AIR) : --

''......It is the settled position of law that theCourt has no jurisdiction to enter into the merits of the case or to examine the documents and oral evidence placed before the Arbitrator, which do not form a part of the award, for the purpose of finding out whether or not the Arbitrator has committed any error, either of law or of fact, in awarding an amount in respect of a particular item of claim........'

Thus law is well settled that the arbitrator is the sole judge of the facts and law involved in the case before him and his decision when not supported by reasons is not open for review by the court unless an objection to the legality of the award is apparent on the face of it. In the present case, no legal proposition, much less an erroneous legal proposition, has been made the basis of the award and the award itself does not reveal that the learned Arbitrator was under any misconception of law. Therefore, the objection of the appellants that there are errors of law on the face of the award must be rejected. The objection that the award is liable to be set aside on the ground of non-consideration of the evidence and submissions of the parties must be rejected as the learned Arbitrator has specifically recorded in the award that he had carefully considered the claims and counter, oralevidence adduced by the parties, written submissions and citations filed by the parties and the arguments advanced by the parties. In (1981) 52 Cut LT 369 : (AIR 1981 Orissa 188) (Para 15) (Union of India v. Builders Union) it was held :

'The next contention is that the claim involves factual aspects and requires proof, but no evidence having having been adduced the award is based on no evidence. In para 6 of the award the arbitrator has stated that he examined the claims and counter claims of the claimants and the respondents very carefully in the light of all the materials produced before him and he had given full opportunity to the parties of supporting their respective cases before him. He has, however, not made any reference to the evidence in support of his findings. The law, as it now stands, is that the arbitrator being a domestic tribunal is not required, while making award, to refer to the evidence reasons therein for allowing or disallowing the amounts claimed by them and it is not necessary for him to give a specific finding on each of the separate claims. If an arbitrator has come to a wrong conclusion, it would not be a ground for setting aside the award. In view of the position of the law stated above, the mere fact that the arbitrator did not refer to any evidence produced by the parties does not render the award invalid.'

In the present case also the award cannot be set aside merely on the ground that the learned Arbitrator has not specifically referred to any evidence or submissions of the parties. The learned Additional Government Advocate has further urged that the award is liable to be set aside on the ground of misconduct of the learned Arbitrator and in support of his Contention he relies on the following two decisions. In AIR 1975 SC 1259 (K. P. Poulose v. State of Kerala) it was held (Para 6) :

'Under Section 30(a) of the Arbitration Act an award can be set aside when an Arbitrator has misconducted himself or the proceedings. Misconduct under Section 30(a) has not a connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fairdecision. It is in this sense that the Arbitrator ^ has misconducted the proceedings in this case. We have, therefore, no hesitation in setting aside such an award..................'

In AIR 1974 Madh Pra 199 (Ardeshar Irani v. State of M.P.) it was held (Para 12) :

'Thus, such is the wide meaning that the expression 'misconduct' has assumed in legal parlance and that is how the expression has to be understood in relation to arbitration proceedings. It is not only the cases where moral turpitude of the arbitrator has been made out which alone fall within this category but even the cases where no moral turpitude is definitely proved against the arbitrator, yet the facts disclose a technical or legal misconduct in relation to the arbitrator's conduct or the proceedings that a ground of misconduct for setting aside the award under Clause (a) of Section 30 of the Act would be made out.''

In the present case, the award on the face of it does not indicate that the learned Arbitrator has drawn any inconsistent conclusion on his own findings or has arrived at his decision by ignoring any important material. The appellant's objection in this regard must be rejected.

4. The next point urged by the learned Addl. Government Advocate relates to the issue of limitation. It is submitted that the work in question was closed on 10-10-72 on the request of the respondent for closure of the contract, but the application by the respondent to the Court for appointment of an arbitrator under Section 8(2) of the Act which was registered as Misc. Case No. 8 of 1980 was filed by him on 15-4-80, clearly beyond the period of limitation of three years. It is further submitted that though this point was specifically taken in the grounds of objection and urged before the court, in the impugned judgment the learned Subordinate Judge erroneously overruled the objection on the ground that the question of limitation with regard to the claim was for the arbitrator to decide and that the validity of the award could not be challenged on the point of limitation. On going through the grounds of objection filed by the appellants before the learned Subordinate Judge, I find that in para 16 the appellants have specifically pleaded that the application under Section 8 of the Act was notmaintainable after long six years and therefore the appointment of the arbitrator was illegal and the entire proceeding was vitiated. In this context it would be useful to refer to the following observations made by the Supreme Court in AIR 1967 SC 990 (Wazir Chand Mahajan v. Union of India) (Para 7) :

'There is no doubt that Clause (1) of Section 37 of the Arbitration Act deals only with the authority of the arbitrator to deal with and decide any dispute referred to him : it has no concern with an application made to the Court to file an arbitration agreement and to refer a dispute to the arbitrator. After an agreement is filed in Court and the matter is referred to the arbitrator, it is for the arbitrator to decide by the application of the law contained in the Limitation Act, whether the claim is barred. But Section 37(1) does not confer authority upon the Court to reject the application for filing of an arbitration agreement under Section 20 of the Arbitration Act because the claim is not made within three years from the date on which the right to apply arose. In dealing with an application for filing an arbitration agreement, the Court must satisfy itself about the existence of a written agreement which is valid and subsisting and which has been executed before the institution of any suit, and also that a dispute has arisen with regard to the subject-matter of the agreement which is within the jurisdiction of the Court. But the Court is not concerned in dealing that application to deal with the question whether the claim of a party to the arbitration agreement is barred by the law of limitation : that question falls within the province of the arbitrator to whom the dispute is referred.

Therefore, it is for the arbitrator and not the Court to deal with the question whether the claim of a party to the arbitration agreement is barred by the law of limitation. However, the question whether an application under Section 8 or Section 20 of the Act is barred by the law of limitation is to be decided by the court to which the application is made and not by the arbitrator. Courts dealing with the applications under Section 8 or Section 20 of the Act must not lose sight of this important distinction.

5. Mr. Y. Das, learned counsel appearing for the respondent, submitted that in their counter in Misc. Case No. 8 of 1980 the appellants have nowhere pleaded that therespondent's application under Section 8(2) of the Act was barred by limitation and as such it was not open to the appellants to raise this question before the court after the arbitration proceedings in which they had participated were over. The learned Addl. Government Advocate countered this argument and submitted that the issue of limitation affects the jurisdiction of the Court and therefore it was open to the appellants to plead the issue of limitation before the court even after the arbitration proceedings were over. In this context it would be useful to refer to Section 3(1) of the limitation Act which provides :

'3(1). Subject to the provisions contained in Sections 4 to 24 (inclusive), every suit instituted, appeal preferred and application made, after the prescribed period shall be dismissed although limitation has not been set up as a defence.'

In AIR 1964 SC 1336 (M. L. & B. Corporation v. Bhutnath) it was observed (para 9):

''Under Section 3 of the Limitation Act, it is the duty of the Court not to proceed with the application if it is made beyond the period of limitation prescribed. The Court has no choice.'

In 1965 (31) Cut LT 1011 : (AIR 1966 Orissa 59) (Golak Chandra Biswal v. State of Orissa) and (1970) 36 Cut LT 279 (Bhima Pashan v. Masyaraju) it has been held that Section 3(1) of the Limitation Act being a mandatory provision affects the jurisdiction of the Court where a suit, appeal or application is entertained beyond the period of limitation.

In AIR 1965 Madh Pra 102 (Lalchand v. Dharam Chand) it was held :

'A suit which on the face of it is found barred by time must be dismissed even at the appellate stage though the question was not pointedly raised or specifically considered in the Court below in view of the mandatory provisions contained in Section 3(1) of the Limitation Act.'

Further in AIR 1962 SC 1810 (Khardah Ltd. v. Raymon & Co. (India) Private Ltd.) it was held that an initial want of jurisdiction could not be cured by acquiescence and that the party applying under Section 33 of the Act was not estopped by its conduct in appearing before the arbitration and in taking part in the proceedings before them from questioning the validity of the award.

In view of the principles enunciated in the aforesaid decisions, I hold that the appellants were entitled to raise the question of limitation with regard to the respondent's application under Section 8 of the Act before the Court below although they had not specifically raised this objection before the appointment of the arbitrator and had taken part in the proceedings before the arbitrator.

6. In this Court the respondent has filed an affidavit that the final bill in connection with the work was passed by appellant No. 3 on 23-11-77 and accordingly it has been urged on his behalf that his application dated 15-4-80 under Section 8(2) of the Act was clearly within time. On behalf of the appellants, a counter has been filed in this Court wherein it is stated that dispute between the parties actually arose on 22-7-74 when the respondent disputed the date of completion as well as the measurement. It is also stated in the counter that the final bill was passed by appellant No. 3 on 23-11-77. It is not in dispute that Article 137 of the Limitation Act governs applications to the Court under Section 8 of the Act (See AIR 1977 SC 282 (Kerala State Electricity Board v. T.P. Kunhaliumma); AIR 1981 Raj 36 (State of Rajasthan v. Mehta Chetan Dass Kishandass) and AIR 1983 All 462 (Sindh Construction Co. v. Union of India).) The period of limitation prescribed under Article 137 of the Limitation Act is three years and the time from which the period begins to run is the date on which the right to apply accrues. In AIR 1981 Delhi 293 (Oriental Building & Furnishing Co. Ltd., New Delhi v. Union of India in the context of Sec. 20 of the Act it was observed (paras 4 and 9) :

'The important words in this section are the existence of the arbitration agreement and the existence of a difference between the parties. Secondly, this section presents an alternative to the parties other than proceeding to arbitration on their own, i.e., without coming to the Court. The way the Act is framed suggests that first you have to have a contract concerning the reference of certain types of disputes to arbitration. If you have this contract, still you cannot apply until you have a difference. The starting point of the reference under Section 20 is, therefore, the date on which a difference arises to which the arbitration agreement applies. Neither party can move the Court without the existence of a difference between them. So, the material question iswhen the difference arose between the parties and not when the lease expired, nor when it was entered into..............

In this connection, it is necessary to note that a difference can arise long after some work has been done under a contract. There can be negotiations between the parties and all sorts of correspondence. But, it is only when they come to the conclusion that they cannot resolve the dispute between them, that it can be said that a difference arises. A difference under the arbitration agreement is a claim made by one party which is refuted by the other party. At that stage, it is open to the parties or any of them to say -- now let us go to arbitration to get this difference settled. It is at this stage that it is possible to say that difference has arisen between them. In this sense, Section 20 of the Arbitration Act differs from the normal kind of claims that arise in suits. In the case of a suit, the date on which the cause of action arises is the date from which the limitation period starts. Under Section 20, it is the date on which the right to apply accrues that determines the starting point. That starting point does not coincide with the date on which the cause of action for filing a suit arises.'

With respect, I agree with the principles decided in the aforesaid decision and the same principles should apply to an application under Section 8 of the Act. In the present case it cannot be said that the parties had come to the conclusion on 22-7-74 that they had failed to resolve the dispute between them merely because on that date the respondent disputed the date of completion as well as the measurement. Admittedly, the final bill in connection with the work was passed by appellant No. 3 on 23-11-77 and that is the date on which the right to apply accrued to the respondent. Hence, I hold that the respondent's application under Section 8(2) of the Act was filed by him within the period of limitation.

7. Learned Addl. Government Advocate further urged that the arbitrator had no jurisdiction to award interest from 1-11-72 till the date of final payment or decree whichever was earlier. This point has been considered by this Court on a number of occasion and it has been consistently held that in the absence of a specific clause in the agreement prohibiting award of interest, the arbitrator has jurisdictionto award interest. In (1979) 47 Cut LT 472 : (AIR 1980 Orissa 74 at p. 75) (Executive Engineer, R.E.O., Khurdav. D. N. Senapati)it was held :

'In this case, the arbitrator after assessing the amounts in respect of the claim under items 1 and 6 has awarded interest @ 9 per cent per annum for the period 1-8-1973 to 3i-7-1977. He has of course not stated the reasons as to why he granted interest only for the aforesaid period. From the appendix it appears that the work in question was actually completed on 31-5-1973. So possibly 2-8-1973 was the due date of payment of the amount due on the work executed by respondent No. 1. The Arbitrator was appointed on 30-9-1975 and the award was passed on 10-8-1977. The Arbitrator for some reason or other has not granted any future interest after 31-7-1977. But for the period for which interest has been granted, i.e. 1-8-1973 to 31-7-1977, the Arbitrator has jurisdiction to grant interest, and no exception can be taken to his award to that effect. As nothing is shown that there is anything in the agreement prohibiting payment of interest and there is no error apparent on the face of the award to that effect, the award, so far as it relates to the payment of interest also, cannot be interfered with.'

In the present case, admittedly there is no clause in the agreement prohibiting award of interest by the arbitrator. Hence, the objection to the award of interest by the arbitrator must be rejected.

8. For the reasons stated above, this appeal is dismissed. In the facts of this case, parties will bear their own costs. The lower courts records be sent back immediately.


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